Nuclear deal could cost ratepayers: Auditor

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TORONTO, ONTARIO
- A multibillion-dollar deal Ontario made to acquire nuclear energy has left ratepayers exposed to a series of financial risks that could translate into higher electricity rates, Ontario's auditor general said recently.

The $4.25-billion deal struck with private company Bruce Power in 2005 to refurbish two idled nuclear units was like a pricey insurance policy that protected the government from the costly risks associated with bringing new power online, Auditor General Jim McCarter found.

The government decided it would pay Bruce Power an above-average price for the new energy stream and remove most of the ratepayers' liability if the cost of the nuclear units ran over budget, McCarter said in a report commissioned by the government.

McCarter estimated Bruce Power will receive a premium of around 44 per cent in exchange for assuming the ongoing operating-cost risks, but ratepayers are still on the hook for some construction-related risks that could translate into even bigger bills.

"Ratepayers are going to be paying more, a fairly significantly higher price for electricity (produced by) these units," he said.

"On the other hand, you have to recognize that if you're transferring a lot of these risks to a private-sector organization, you're going to have to pay them something for that.

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McCarter said the deal was a "mixed bag" for the government, with some good points and bad.

In the case of a so-called "mega overrun"  when the price ends up being 50 to 100 per cent above estimates  the government will pay only a quarter of the extra costs, and can avoid previous nightmares like the controversial Darlington station which nearly tripled in price during the 1980s to $14 billion.

But McCarter said ratepayers would have to pay in the likelier event that overruns are in the range of 10 to 20 per cent above estimates. And if costs run below estimates, it's unlikely ratepayers will benefit, he added.

The opposition said the deal with Bruce Power had too many sweetheart" provisions and stuck ratepayers with too much liability.

"The government says they've negotiated away the risk  that's nonsense," said New Democrat Leader Howard Hampton. "If Bruce Power went bankrupt, it would be the people of Ontario that would have to go in and take this over, because you're dealing here with an essential service."

Conservative critic John Yakabuski said the government was in a position of weakness when it signed the deal, noting it was in desperate need of power and forced into a bad decision.

"Bruce Power acted in the best interests of its shareholders," he said. "The auditor's report would certainly raise some doubt as to whether the government acted in the best interests of its shareholders."

But Energy Minister Dwight Duncan said he feels vindicated by the report, which found the government properly considered and addressed the risks of the deal.